U.s. Trade Policy Takes Dual--if Not Fast--track

January 26, 1999|By Merrill Goozner, Washington Bureau.

WASHINGTON — A year when the U.S. trade deficit is expected to soar to unprecedented heights would hardly seem the most propitious time for the U.S. to kick off a new round of talks to promote global trade.

But it now appears likely that multilateral negotiations aimed at new reductions in trade barriers around the world will get under way in December, when 7,000 trade officials gather in the U.S. President Clinton signaled his administration's willingness to take part in the talks during his State of the Union address last week.

The administration had been dragging its feet on backing a new round of talks since Sept. 17, when the bipartisan free-trade coalition that had governed U.S. trade policy throughout the 1990s collapsed in the House of Representatives. The House voted 243-180 to deny the president an extension of so-called "fast-track" trade authority. Congress cannot make changes in trade treaties negotiated under fast-track authority; it can only vote them up or down.

There have been warning flags on the political front, too. Vice President Al Gore has little interest in seeing the administration antagonize core Democratic constituencies, including organized labor and environmentalists, during the run-up to presidential primary season.

That helps explain why the U.S. trade representative's office and other administration officials in recent months have taken up the cause of the U.S. steel industry in such a high-profile manner. The industry, with strong backing from the United Steelworkers of America union, filed a series of anti-dumping cases against foreign steelmakers, including Japan, the largest exporter to the U.S.

Treasury Secretary Robert Rubin, Commerce Secretary Bill Daley and U.S. Trade Representative Charlene Barshefsky will appear before the Senate Finance Committee on Tuesday to explain their trade strategy, which, on the surface at least, appears to be heading in opposite directions.

In fact, it is less contradictory than it seems. The Clinton administration has consistently worked within a multilateral framework for freer trade while using domestic law to threaten exporters, especially the Japanese, who appear to be violating long-standing U.S. trade laws.

U.S. anti-dumping law prohibits exporters from selling below the cost of production. Section 201 of the trade law allows retaliatory tariffs on exporters who do serious harm to a domestic industry. Both are compatible with World Trade Organization rules, which were created during the last round of trade talks.

"Our continued role in the international economy relies on domestic support, and that means ensuring our trading partners play by the rules," Barshefsky told reporters last week after the president spoke.

The administration isn't alone in insisting that foreign producers play by U.S. rules. Finding an acceptable answer to the U.S. steel industry's complaints is key for Finance Committee Chairman William Roth (R-Del.), too, since he would like nothing better than to craft a sweeping trade bill this year that would grant the president--whoever it is--fast-track authority as the new round of talks gets under way.

The steel caucus has just as many Republican members of Congress as Democrats. Indeed, Republican senators from Pennsylvania, Ohio and Indiana, the nation's leading steel-producing states, have played a leading role in pushing the administration to stand up to Japan on steel.

Like most trade disputes with Tokyo, there's only a slight chance that the steel talks will result in deployment of trade arsenal's ultimate weapon: retaliatory tariffs. "If jawboning was ever going to work, the time would be now," said Greg Mastel, a trade economist at the Economist Strategy Institute. "Japan is completely attuned to the U.S. political scene, even more now than in the 1980s."

A finding by the International Trade Commission, a U.S. agency, on whether the industry has been harmed by foreign steel is due in mid-February. If positive, which is expected, the Commerce Department could follow through on its threat to levy duties on steel imports as far back as last fall.

The jawboning may already be working. Japan released trade figures Monday showing its steel imports beginning to taper off. The U.S. Commerce Department will release its data on December steel imports Thursday.

But it is unlikely that the steel industry will drop its complaint just because imports start dropping. The Senate Finance Committee may consider the industry's request to make U.S. dumping laws like the WTO's. Right now, it is easier to prove dumping under WTO rules than under U.S. rules.

The committee is also taking testimony about a host of trade-expansion measures, which, if added to the bill, would doom a new attempt at passing fast track. They include giving special tariff breaks along the lines of the North American Free Trade Agreement to nations in the Caribbean basin, including Venezuela and Colombia, and sub-Saharan Africa.

The coalition that defeated fast track last year has vowed to fight any new attempt to resuscitate it. "Any law that attempts to bring back fast track is not only backward-looking, but as a practical matter it is dead on arrival," said Lori Wallach, a trade attorney for Global Trade Watch, which played a leading role in the coalition.